It is estimated that around 30 percent of peoples disposable income is being spent on mortgage payments for those who have purchased a new home. This is the latest figure that gives an idea of what people are spending their disposable income on in the final quarter of 2011.
Mortgage payments are at their most affordable level for nearly 15 years and in the north of England and parts of Scotland mortgage payments are as low as 20 percent of peoples’ disposable income. This information has come from the Halifax. This is the lowest point since 1997 when it was estimated around 25 percent of a person’s income was being spent on the mortgage. It is a significantly better figure than the average over the last three decades which stands at about 37 percent.
The study also highlighted the difference between the repayment rates in the north and the south of the country indicating that there is a significant divide in England. London, particularly the district of Kensington and Chelsea was rated as the least affordable place to live where mortgage payments can be up to 80 percent of the persons disposable income.
The cheapest area to live was East Ayrshire in Scotland were only around 16 percent of disposable income is spent on a mortgage. Since the income peak of 2007 mortgage payments have reduced by nearly 50 percent. House prices as well as mortgage rates have also fallen and Scotland now sees the most affordable homes in the UK.
Northern Ireland, Humberside and Yorkshire are other areas where mortgage payments are more affordable than the national average, these three areas together have an average mortgage repayment of 20 percent of earnings. The south-east is one of the most expensive regions with repayment rates being over 30 percent of disposable income.
The Bank of England has said that with interest rates at an historic low, this means that mortgage deals are available cheaper than ever. Halifax have stated that the affordability of mortgages has helped prop up the housing market in a time when household budgets are being squeezed.
A housing economist from the Halifax is Martin Ellis who has commented, “Lower mortgage rates and a fall in the cost of housing has meant that more people are able to buy at house. Unfortunately the deposit is still very high but for those who can afford it this is a very good time to enter the housing market. The affordability of these mortgage rates are one of the reasons why housing demand has been so strong throughout 2011 despite the economy’s decline.”
Lending criteria is continually become tighter and lending conditions are becoming more strict. It is expected that banks are going to increase the number of mortgage products that they are offering, which is beneficial to consumers, but only those who are able to meet the stricter lending standards. Estate agents have also become concerned that the demand will begin to fall off when the stamp duty relief for first-time buyers ends in the spring.
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